NFT sales have significantly declined, falling by 92 percent globally, from over 200,000 in September 2021 to just under 20,000 in May 2022. Although there has always been volatility in the area, this time it seems more concerning than normal.
On a blockchain, NFTs are data-driven digital tokens that reflect ownership. Almost anything may be an NFT, including movies, music, and other forms of art. Its rise was presumably fueled by this variety. Last year, NFTs gained fans and millions of cash because of their growing popularity. In fact, they even made it into the mainstream after being adopted by well-known companies and celebrities like TikTok and BTS. But in recent months, NFTs’ popularity has been dwindling, leading some people to wonder if this is it for NFTs.
Risky investments and extremely high-interest rates are a dangerous combination
Cryptocurrency has a bad reputation for being unstable. Nevertheless, for a very long time, people felt secure placing wagers on it. It seemed incredibly alluring due to its excellent returns, a well-known fan base (which included Tesla CEO Elon Musk), and growing use cases (such El Salvador proclaiming it a legal tender). However, investors in cryptocurrencies are increasingly cautious due to global rising interest rates and rumors of an approaching recession. NFTs are not spared from this trend, since they are withdrawing their field investments.
This cautious approach is causing these digital tokens to depreciate in value. NFTs were widely purchased as long-term investments. They anticipated that these NFTs would appreciate in value and sell for a significant premium over their initial cost in a few years. However, it appears like they are losing sight of that dream.
The first tweet NFT of former Twitter CEO Jack Dorsey was sold last year for US$2.9 million. It failed to surpass a US$14,000 offer this year, losing up to 99 percent of its worth. And if this isn’t a telltale indicator of waning interest, consider this: Since January of this year, fewer than 80% of people have searched for the keyword on Google. This is a significant decline for something that is so ingrained in web technologies. People used to spend millions of dollars on NFTs, but today they only trade in hundreds (see Snoop Dogg’s NFT, which was auctioned off for more than US$25 million and only received a US$210 bid). Elon Musk, the CEO of Tesla, further added insult to injury by disparaging the well-known Bored Ape Yacht Club NFTs by calling them “pretty fungible.”
Second, there are an excessive number of buyers and sellers in the market. Right now, there are insufficient buyers and too many sellers. NFTs gave artists the freedom to own their work, sell it on their own, and make millions of dollars. But when demand declines, this notion becomes increasingly improbable.
The usefulness—or lack thereof—of NFTs is the final point. That has always been an ambiguous situation that didn’t stop people from purchasing them. But in recent months, that has started to dominate how individuals generally spend their money. Some others think that the present market downturn is, in a sense, natural filtering out undesirable or “useless” tokens.
